On December 19, 2016, the IRS released final regulations regarding the premium tax credits for eligible individuals who enroll in the Marketplace. These regulations finalize many, but not all, of the provisions in the proposed regulations issued in July.
Highlights of the regulations include:
Inaccurate Affordability Information
- An individual is only responsible for the information that he/she provides to the Exchange and is not responsible for inaccurate information provided by third parties, such as their employer.
- The IRS will enforce the intentional or reckless disregard standard during the review of an individual’s tax return, and will apply it where the individual knowingly provides inaccurate information to the Exchange or makes little or no effort to determine whether the information provided is accurate under circumstances that “demonstrate a substantial deviation from the standard of conduct a reasonable person would observe.”
No Annual Enrollment Opportunity
- Applicable Large Employers (ALE) must provide an annual opportunity to enroll in employer sponsored coverage to avoid Code § 4980H penalties for failure to offer employees an effective opportunity to elect to enroll in coverage at least once per plan year.
- Employees are considered eligible for affordable, minimum value coverage under an employer-sponsored plan (and are ineligible for premium tax credits) if they have an annual opportunity to enroll.
- Individuals who decline to enroll in employer-sponsored coverage are considered eligible for the coverage only for the remainder of that plan year. If not provided another opportunity to enroll at the end of the plan year, they are no longer considered eligible for employer-sponsored coverage and become eligible for the premium tax credit.
- This rule applies to both calendar-year and non-calendar-year plans.
Opt-Out Arrangements
- The proposed rules on the affordability implications of opt-out arrangements are not finalized.
- If employer coverage is not affordable because the amount of the available opt-out payment increases the employee’s required contribution this potentially exposes more ALEs to Code §4980H(b) penalties.
- The IRS is still examining the issues raised by opt-out arrangements and expects to finalize those proposed regulations separately.
- Employers can still rely on the transition relief outlined in IRS Notice 2015-87 and the preamble to the proposed regulations continues to apply.
The Benefits team at Hausmann-Johnson insurance will keep you notified of any additional updates. Stay tuned and please contact us if you have any questions regarding this month's brief.
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